Sierra Wireless Reports First Quarter 2013 Results

Sierra Wireless Reports First Quarter 2013 Results

VANCOUVER, BRITISH COLUMBIA--(BUSINESS WIRE)-- Sierra Wireless, Inc. (NAS: SWIR) (TSX: SW):

  • First quarter 2013 revenue of $101.4 million, up 9.8%, year-over-year

  • Non-GAAP loss from operations of $1.4 million, compared to a loss of $2.8 million a year ago

  • Non-GAAP net loss from continuing operations of $0.7 million and loss per share of $0.02, compared to non-GAAP net loss of $2.8 million a year ago and loss per share of $0.09

Sierra Wireless, Inc. today reported first quarter 2013 results. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (GAAP), except as otherwise indicated below.


"We experienced solid year-over-year revenue growth in the quarter, powered by a strong contribution from the acquired Sagemcom M2M business," said Jason Cohenour, President and Chief Executive Officer. "A major focus in the quarter was completing the sale of our AirCard® assets and operations to Netgear, which was accomplished in early April. We are now an M2M pure play, with leading global market share, the industry's broadest product line, and blue-chip customers. Moreover, we now have significant financial capacity to accelerate growth and value creation through acquisitions, as we capitalize on the secular growth opportunity in M2M."

In accordance with U.S. GAAP, assets and liabilities associated with the sale of our AirCard business on April 2, 2013, have been recorded as "held for sale" in our consolidated balance sheet as at March 31, 2013, and the results of operations of the AirCard business as discontinued operations in our consolidated statements of operations for the three months ended March 31, 2013. The historical consolidated statements of operations and related selected financial information have been retrospectively adjusted to distinguish between continuing operations and discontinued operations.

Our segments and product lines have changed from those reported at December 31, 2012. Effective January 1, 2013, we have one reportable M2M segment with two product lines. The OEM Solutions product line includes embedded wireless modules and tools for OEM customers, and the Enterprise Solutions product line includes intelligent gateways, routers and tools for enterprise customers, including a cloud offering for building, deploying, and managing M2M applications.

Revenue for the first quarter of 2013 was $101.4 million, an increase of 9.8% compared to $92.3 million in the first quarter of 2012, and a decrease of 7.3% compared to $109.4 million in the fourth quarter of 2012. The year-over-year revenue increase was driven by contribution from the M2M business of Sagemcom which was acquired in August 2012. Revenue from OEM solutions was $89.2 million in the first quarter of 2013, up 11.4%, compared to $80.1 million in the first quarter of 2012. Revenue from enterprise solutions was $12.2 million in the first quarter of 2013, in line with the first quarter of 2012.

On a GAAP basis, gross margin was $33.4 million, or 32.9% in the first quarter of 2013, compared to $27.9 million, or 30.2% in the first quarter of 2012. Operating expenses were $40.3 million and loss from operations was $6.9 million in the first quarter of 2013, compared to operating expenses of $35.3 million and a loss from operations of $7.4 million in the first quarter of 2012. Net loss from continuing operations was $7.9 million, or $0.26 per diluted share, in the first quarter of 2013, compared to net loss of $7.2 million, or $0.23 per diluted share, in the first quarter of 2012. Net loss for continuing and discontinued operations was $6.1 million, or $0.20 per diluted share, compared to net earnings of $0.3 million, or $0.01 per diluted share, in the first quarter of 2012.

On a non-GAAP basis, gross margin was 33.0% in the first quarter of 2013, compared to 30.3% in the first quarter of 2012. Operating expenses were $34.9 million and loss from operations was $1.4 million in the first quarter of 2013, compared to operating expenses of $30.8 million and loss from operations of $2.8 million in the first quarter of 2012. Net loss from continuing operations was $0.7 million, or $0.02 per diluted share, in the first quarter of 2013, compared to a net loss of $2.8 million, or $0.09 per diluted share, in the first quarter of 2012. Net earnings for continuing and discontinued operations were $2.9 million, or $0.09 per diluted share, in the first quarter of 2013 compared to net earnings of $5.0 million, or $0.16 per diluted share, in the first quarter of 2012.

Non-GAAP results exclude the impact of stock-based compensation expense, acquisition costs, restructuring costs, integration costs, disposition costs, acquisition amortization, impairment, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments. We disclose non-GAAP amounts as we believe that these measures provide our shareholders with better information about actual operating results and assist in comparisons from one period to another. The reconciliation between our GAAP and non-GAAP results is provided in the accompanying schedules.

Financial Guidance

The Company provides the following guidance for the second quarter of 2013 for its continuing operations:

In the second quarter of 2013, we expect solid sequential and year-over-year revenue growth. We expect gross margin percentage and operating expenses to be similar to the first quarter of 2013 levels.

Q2 2013 Guidance

Consolidated

Non-GAAP

Revenue

$107.0 to $111.0 million

Earnings from operations

$0.5 to $1.8 million

Net earnings from continuing operations

$0.4 to $1.2 million

Earnings per share from continuing operations

$0.01 to $0.04 per share

This Non-GAAP guidance for the second quarter of 2013 reflects current business indicators and expectations. Inherent in this guidance are risk factors that are described in greater detail in our regulatory filings. Our actual results could differ materially from those presented above. All figures are approximations based on management's current beliefs and assumptions.

Conference call, webcast and instant replay details

Sierra Wireless President and CEO, Jason Cohenour, and CFO, David McLennan, will host a conference call and webcast with analysts and investors to review the results on Thursday, May 2, 2013, at 5:30 PM Eastern Time (2:30 PM PT). A live slide presentation will be available for viewing during the call from the link provided below.

To participate in this conference call, please dial the following number approximately ten minutes prior to the commencement of the call:

  • Toll-free (Canada and US): 1-877-201-0168

  • Alternate number: 1-647-788-4901

  • Conference ID: 15999405

For those unable to participate in the live call, a replay will be available until May 23, 2013. Dial 1-855-859-2056 or 1-800-585-8367 and enter the Conference ID number above to access the replay.

To access the webcast, please follow the link below:

Sierra Wireless Q1 Financial Results Webcast

If the above link does not work, please copy and paste the following URL into your browser:

http://www.snwebcastcenter.com/webcast/sierrawireless-20130502/

The webcast will remain available at the above link for one year following the call.

We look forward to having you participate in our call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements and information in this press release are not based on historical facts and constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws ("forward-looking statements") including statements and information relating to our financial guidance for the second quarter of 2013 and our fiscal year 2013, our business outlook for the short and longer term and our strategy, plans and future operating performance. Forward-looking statements are provided to help you understand our views of our short and longer term prospects. We caution you that forward-looking statements may not be appropriate for other purposes. We will not update or revise our forward-looking statements unless we are required to do so by securities laws.

Forward-looking statements:

  • Typically include words and phrases about the future such as "outlook", "may", "estimates", "intends", "believes", "plans", "anticipates" and "expects".

  • Are not promises or guarantees of future performance. They represent our current views and may change significantly.

  • Are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:

  • Our ability to develop, manufacture and sell new products and services that meet the needs of our customers and gain commercial acceptance;

  • Our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times;

  • Expected cost of goods sold;

  • Expected component supply situation;

  • Our ability to "win" new business;

  • Expected deployment of next generation networks by wireless network operators;

  • Our operations are not adversely disrupted by component shortages or other development, operating or regulatory risks; and

  • Expected tax rates relative mix of earnings amongst the tax jurisdictions in which we operate, along with foreign exchange rates.

  • Are subject to substantial known and unknown material risks and uncertainties. Many factors could cause our actual results, achievements and developments in our business to differ significantly from those expressed or implied by our forward-looking statements, including without limitation, the following factors. These risk factors and others are discussed in our Annual Information Form and Management's Discussion and Analysis of Financial Condition and Results of Operations, which may be found on SEDAR at www.sedar.comand on EDGAR at www.sec.gov and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada.

  • We may experience higher than anticipated costs; disruption of, and demands on, our ongoing business; diversion of management's time and attention; adverse effects on existing business relationships with suppliers and customers and employee issues in connection with the divestiture of the AirCard assets and operations;

  • Actual sales volumes or prices for our products and services may be lower than we expect for any reason including, without limitation, the continuing uncertain economic conditions, competition, different product mix, the loss of any of our significant customers;

  • The cost of products sold may be higher than planned or necessary component supplies may not be available, are delayed or are not available on commercially reasonable terms;

  • We may be unable to enforce our intellectual property rights or may be subject to claims and litigation that have an adverse outcome;

  • The development and timing of the introduction of our new products may be later than we expect or may be indefinitely delayed;

  • Transition periods associated with the migration to new technologies may be longer than we expect.

About Sierra Wireless

Sierra Wireless (NAS: SWIR) (TSX: SW) offers industry-leading products and solutions for connected devices and machine-to-machine (M2M) communications over cellular networks. Wireless service providers, equipment manufacturers, enterprises and government organizations around the world depend on us for reliable wireless technology. We offer 2G, 3G and 4G wireless modems, routers and gateways as well as a comprehensive suite of software, tools, and services that ensure our customers can successfully bring wireless applications to market. For more information about Sierra Wireless, visit www.sierrawireless.com.

"AirPrime," "AirLink," and "AirVantage" are trademarks of Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners.

SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands of U.S. dollars, except where otherwise stated)
(Unaudited)

Three months ended
March 31,

2013

2012

Revenue

$

101,401

$

92,335

Cost of goods sold

68,023

64,461

Gross margin

33,378

27,874

Expenses

Sales and marketing

10,356

9,321

Research and development

18,363

14,931

Administration

8,123

8,459

Restructuring

117

180

Integration

27

Amortization

3,276

2,387

40,262

35,278

Loss from operations

(6,884

)

(7,404

)

Foreign exchange gain (loss)

(2,370

)

206

Other expense

(132

)

(171

)

Loss before income taxes

(9,386

)

(7,369

)

Income tax recovery

1,448

124

Net loss from continuing operations

(7,938

)

(7,245

)

Net earnings from discontinued operations

1,863

7,590

Net earnings (loss)

$

(6,075

)

$

345

Other comprehensive income (loss):

Foreign currency translation adjustments, net of taxes of $nil

(904

)

2,002

Comprehensive income (loss)

$

(6,979

)

$

2,347

Basic and diluted net earnings (loss) per share attributable to the Company's common shareholders (in dollars)

Continuing operations

$

(0.26

)

$

(0.23

)

Discontinued operations

0.06

0.24

$

(0.20

)

$

0.01

Weighted average number of shares outstanding (in thousands)

Basic

30,695

31,175

Diluted

30,695

31,175



SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(Unaudited)

March 31, 2013

December 31, 2012

Assets

Current assets

Cash and cash equivalents

$

55,923

$

63,646

Accounts receivable, net of allowance for doubtful accounts of $1,959
(December 31, 2012 - $2,435)

114,160

108,624

Inventories

11,017

12,675

Deferred income taxes

22,230

22,199

Prepaids and other

34,323

24,252

Assets held for sale

46,876

54,340

284,529

285,736

Property and equipment

19,153

20,039

Intangible assets

50,525

56,357

Goodwill

96,205

97,961

Deferred income taxes

3,880

3,880

Other assets

767

790

$

455,059

$

464,763

Liabilities

Current liabilities

Accounts payable and accrued liabilities

$

128,125

$

128,216

Deferred revenue and credits

1,306

1,312

Liabilities held for sale

7,075

10,353

136,506

139,881

Long-term obligations

24,771

26,526

Deferred income taxes

300

300

161,577

166,707

Equity

Shareholders' equity

Common stock: no par value; unlimited shares authorized; issued and
outstanding 30,791,455 shares (December 31, 2012 - 30,592,423 shares)

324,748

322,770

Preferred stock: no par value; unlimited shares authorized;
issued and outstanding: nil shares

Treasury stock: at cost 312,502 shares (December 31, 2012 - 716,313 shares)

(2,283

)

(5,172

)

Additional paid-in capital

20,807

23,203

Deficit

(41,424

)

(35,283

)

Accumulated other comprehensive loss

(8,366

)

(7,462

)

293,482

298,056

$

455,059

$

464,763



SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands of U.S. dollars)

(unaudited)

Common Stock

Treasury Shares

# of shares

$

# of shares

$

Additional
paid-in capital

Deficit

Accumulated
other
comprehensive
income (loss)

Total

Balance as at December 31, 2011

31,306,692

$

328,440

877,559

$

(6,141)

$

20,087

$

(62,482)

$

(8,000)

$

271,904

Common share cancellation

(800,000)

(6,312)

(6,312)

Stock option tax benefit for U.S. employees

71

71

Stock option exercises

85,051

637

(201)

436

Stock-based compensation

6,713

6,713

Purchase of treasury shares for RSU distribution

336,638

(2,489)

(2,489)

Distribution of vested RSUs

680

5

(497,884)

3,458

(3,467)

(4)

Net earnings

27,199

27,199

Foreign currency translation adjustments, net of tax

538

538

Balance as at December 31, 2012

30,592,423

$

322,770

716,313

$

(5,172)

$

23,203

$

(35,283)

$

(7,462)

$

298,056

Common share cancellation

(124,300)

(1,311)

(66)